How to Legally Move Your Business Offshore For Tax Purposes

Let me start by saying it is possible to move all or part of your otherwise US business offshore. You have to follow the rules and you may find that you still need to pay some U.S. tax. You’ll pay more for business set-up and maintenance and your tax reporting will be more expensive.

Let’s go over what I call the Easy C’s. First up, customers. Where are your customers from where do you fulfill the service and work? If you have a store-front coffee house in your home state, you’re going to have a harder time trying to show you have customers and fulfillment out of the country. The easiest way to do this is with a website that was developed and fulfills out of the US.

Second, capital. Who owns the company? This is an easier thing to set up because all you need is a foreign entity. You still need to report your ownership, but that alone will not mean you owe tax.

Third, cash. If you bring money back into the US, you’re probably going to pay tax on it. That means if you have a debit card and take money out in the US, you’re going to pay tax. And if you think you’re not going to get caught, you are wrong. It was illegal before and now it’s illegal and easy to catch, thanks to FATCA.

You can set up a company to have income in another country, under the right circumstances. You need to work a US tax expert, not necessarily a foreign tax expert for the US part. After all, the point is not to pay tax in another country. The point is to reduce your taxes in the US.

It probably sounds like I’m on a soap box here, and the fact is, I am. I can guarantee that at least half of a conversation I have with a new client about moving a business offshore will include dispelling the ‘tricks’ you can use to avoid tax. You can’t. The penalties are huge if you try. And you will be caught. Follow the rules right from the start and you’ll avoid expensive headaches.

UPDATE! The House, Senate and President have apparently reached some kind of deal on extending the “Tax Extender Bill for 2014.” In exchange, the corporate tax code is slated to be overhauled. If this goes as plans, there will be sweeping changes to corporate tax law, particularly in the international arena. Make sure you have a tax professional who is current on tax changes involved in international tax planning.

Leave a Comment

Love from our customers

I have initially heard Diane's name from the podcast series called "Lifetime Cashflow Through Real Estate Investing" offered by Rod Khleif. To say Diane offered a lot of valuable tips during the podcast is an understatement! She touched upon such important and valuable topics as cost segregation, things to look for in a property inspector, write off when filing income taxes, and etc. I then went ahead and jumped on Diane's website USTaxAid.com. After reviewing just a handful of Diane's articles, I have found myself emerged into reading up and following up further on such important topics for any investor as itemizing deductions, searching for big cash-flowing properties under the new administration and much much more. I'm really excited about finding Diane's site and making a good use of her blog posts and articles. I hope other real estate investors will benefit from it as well! Thank you Diane!

Alina T

I am absolutely floored by Diane Kennedy's breadth of experience when it comes to the entirely too complicated US tax code! She has reduced my businesses tax bill by MILES and has actually, somehow, gotten us a refund! For the record, our international business turns over $80 million annually! She is very responsive to all of my queries and is just an absolute pleasure to work with. I really don't know what we would do without her and her team. Thank you Diane and USTaxAid!!!

A VERY happy client!

Please tell Diane she is fantastic. I really enjoyed talking to her and her knowledge is amazing. It is very helpful to have her guidance.

Laura M, California

Thank you for your great books and information.

Jon B, CA

An entirely new perspective...new possibilities...I loved every minute!

Christine H, Lakeport, CA

I can take all that I learned and apply it to my business, improve efficiency and create more with less!

Andrea O, Covina, CA

Diane, You have made and saved me tons of money over the last 5 years!

Greg M, Camden, IN

Diane, You're such a wealth of knowledge.

Lana K, Fairview, OR

Thank you for writing from the heart. You challenged me today, supported my dream and helped me move forward.